What You Should Avoid While Waiting For Mortgage Approval

Getting mortgage approval can be an exciting yet stressful time. You’ve found your dream home, your offer has been accepted, and now your fate lies in the hands of the mortgage lender as you await their final approval.

It’s tempting to want to celebrate or make big purchases, but hold off! There are several key things you should avoid doing while waiting for mortgage approval Making the wrong move could jeopardize your approval, delay closing, or lead to a higher interest rate

Here are the top 7 things to avoid while waiting for mortgage approval

1. Don’t Apply for New Credit

Lenders look at your credit score very carefully when they decide whether to give you a mortgage. When you apply for new credit lines, like personal loans or credit cards, your credit report is hard-echocked. If you get too many hard inquiries in a short amount of time, your credit score may go down.

Even if you’re approved for new credit, the increase in available credit can negatively impact your debt-to-income ratio. Wait until after closing to apply for any new credit.

2. Don’t Make Big Purchases

Hold off on making any large purchases, like buying a car, expensive electronics, or luxury items on credit. These purchases will increase your debt obligations and may raise red flags with underwriters when they review your finances right before closing.

If possible, wait until after closing to make big-ticket purchases to avoid complicating the underwriting process.

3. Don’t Co-Sign Loans for Others

Co-signing a loan for a friend or family member also counts as taking on new debt obligations. Even if you don’t intend to make any of the payments, the lender will include the cosigned loan payment when calculating your debt-to-income ratio.

Wait until after closing to co-sign any loans to avoid this scenario.

4. Don’t Change Jobs or Income Sources

For mortgage approval, you must have a stable job and other sources of income. During the approval process, don’t change jobs or start making money in a different way. If the income changes for the better, the underwriters might see it as a sign of instability and a red flag.

Notify your lender immediately if your employment situation must change before closing. Provide documentation to show consistent income from the new job.

5. Don’t Make Unusual Large Deposits

Large deposits from an unknown source may make underwriters think you’re taking out undisclosed loans or receiving gift funds that haven’t been properly documented. If you receive wedding gift checks or cash gifts towards your down payment, document where the money came from.

Provide bank statements showing the large deposit and have the gift giver write a letter confirming they gave you the cash as a gift. Follow your lender’s guidelines for documenting gift funds.

6. Don’t Close Old Credit Accounts

Having a long, positive history of open credit accounts helps your credit score and shows lenders you can responsibly manage available credit. Avoid closing old credit card accounts that are in good standing during the approval process.

When you close accounts, the amount of credit you have available goes down, and your credit score may drop a few points. Leave accounts open until after closing.

7. Don’t Rush the Process

While it’s exciting to get mortgage approval and start house hunting, avoid rushing through the application process. Taking the time upfront to provide all required documentation, double check everything, and get pre-approved by multiple lenders sets you up for success.

If anything is inaccurate or missing, it can delay approval. You can compare quotes and interest rates when you look at more than one lender. A few extra days of research up front can save you a lot of money over the loan’s life.

What You Should Do

Be upfront with your lender about any credit inquiries or new accounts opened during the process. Provide all requested documentation quickly and accurately. Notify your lender immediately of any changes to your employment or income.

Most importantly, be patient and avoid any major financial moves or purchases until you have the final mortgage approval. Taking on additional debts, changing jobs, and rushing the process are the main pitfalls that can sabotage the approval process.

By knowing what not to do, you can smoothly navigate the mortgage process without jeopardizing your approval. Keep your finances steady, respond promptly to lender requests, and you’ll soon have the keys to your new home in hand.